In a Hole

Political realities blunt Narendra Modi’s attack on the NREGA

At the end of December 2015, the central rural development ministry was in a state of panic. Nine of India’s largest states had declared drought in several districts. The scant kharif harvest meant many farm labourers, who might have been employed on fields, went without work. Water was so scarce that many farms weren’t sowing a winter crop, further diminishing employment prospects. In greater numbers than usual, farm workers sought support, as they have done in the past ten years, from the National Rural Employment Guarantee Act, or the NREGA, which guarantees at least 100 days of employment at minimum wage each year to every rural household. In December alone, demand for work under the act was twice what it was over the same month in 2014.

But 95 percent of the funds allocated to the scheme in the budget last March had already been spent. Twelve states, including the drought-hit Odisha, Andhra Pradesh and Uttar Pradesh, had spent more money than they had been allotted. This meant that work under the programme could soon grind to a halt. It was under these circumstances that Birendra Singh, the minister for rural development, wrote to the finance minister, Arun Jaitley, seeking additional funds of Rs 5,000 crore. (On 25 February, the journalist Nitin Sethi reported in Business Standard that the centre owed states Rs 5,595 crore for work completed under the scheme.)

Singh’s letter seemed at odds with Modi’s leanings, given how vociferously the prime minister has opposed the programme. While campaigning for the 2014 general elections, Modi used the NREGA as political ammunition against Sonia and Rahul Gandhi, declaring in Karnataka, “When the pockets of Congress are full, you can call it NREGA.” At other times, he offered incomprehensible policy alternatives, such as changing the programme’s name from an “employment” guarantee scheme to a “development” guarantee scheme.

On entering office, Modi didn’t immediately decide on the fate of the programme. But the new government’s lack of enthusiasm was evident. While around 50 percent of all payments to workers were delayed in 2013, this figure rose to 70 percent at the end of Modi’s first year in power. The rural development ministry, which administers the programme, posted an explanation on its website in January 2015, and cited several administrative bottlenecks, including the centre’s failure to transfer funds to the states in time. It also singled out negative comments made by Singh’s predecessor, Nitin Gadkari, who had proposed to limit the programme to the country’s poorest 200 districts and restrict spending on wages. The ministry’s note said Gadkari’s remarks had caused “psychological” damage, and “fear that the programme would be wound up” or that “money won’t come.” (It would later modify the note to remove Gadkari’s name and blame the media instead.)

Modi finally spelled out his intentions for the NREGA in parliament, during the budget session in February 2015. Claiming to have better political sense than to scrap the programme, he said he’d keep it running because “it is a living monument to the failure of the Congress party.” His party members whooped and thumped their desks as he went on contemptuously: “After 60 years, people are still made to dig holes in the ground.”

These were astonishingly petty comments coming from a prime minister. Effectively, Modi was saying he was willing to sustain a scheme that was, in his opinion, wasteful, to score a point against a political rival. Modi also seemed to disregard the consultative process by which the NREGA had been crafted and passed, with support from across party lines, including from the BJP.

The prime minister’s remarks also seemed to betray a deep-seated contempt for physical labour, and its significant, if modest, contribution to the rural economy. A few days after his speech, a group of men and women in Irood village, in Jharkhand’s Khunti district, were out in the spring morning, engaged in just what Modi had scoffed at—digging holes. Twenty-five feet in diameter, and about as deep, these were large wells, which, once lined with stone and completed, would water the surrounding fields, allowing farmers to grow additional crop, of vegetables or wheat. Such wells, 100,000 of which had been built as part of NREGA work in the state, had recharged agriculture in Irood, a young farmer told me when I visited the village while reporting for NDTV. “The wells will last at least 25 years,” he said. “Earlier, my crops would shrivel up when the rains failed. Now, see, I’m growing potatoes.”

If such anecdotal evidence of the NREGA’s popularity didn’t convince Modi, stronger testimony came from his own party colleagues, Singh among them. In his letter to Jaitley, Singh pointed out that, in the second and third quarters of the financial year 2015–2016, the number of person-days of work generated under the NREGA had gone up by 36 percent and 8 percent respectively, compared to the same periods of the previous year. “Given the farmer distress, the demand for wage employment has been high,” Singh wrote.

Before signing off, he thought it necessary to remind the finance minister that the scheme had been designed to be independent of the whims of government officials. The NREGA, he said, “is a demand driven wage employment programme and funds are required to be released to States on demand being raised at the field level.” Indeed, the fact that the programme made employment a right, not limited by budgetary allocations, had marked it out as a significant development in welfare policy in India.

Modi’s cynicism about the scheme wasn’t shared by state governments either. At least three states—Jharkhand, Andhra Pradesh and Telangana, the first two of which are ruled, respectively, by the BJP and a BJP ally—wrote to the centre at the same time as Birendra Singh, demanding more funds. Jharkhand’s chief minister, Raghubir Das, wrote directly to Modi in January. The entire state faced a drought-like situation, he said, pointing out that “54 per cent of rural households in Jharkhand meet at least one deprivation criteria and therefore deserve State help.”

The disinclination towards the NREGA at the centre didn’t begin with Modi. At the end of the UPA’s second term, its finance ministers, first Pranab Mukherjee and then P Chidambaram, cut the budget allotment for the programme from Rs 40,000 crore for the financial year 2011–2012 to less than Rs 35,000 crore for each of the next two years. Other moves drew criticism as well. In May 2013, the activist Aruna Roy resigned from the National Advisory Council, an advisory body set up by the UPA, upset by the government’s opposition to paying minimum wage for NREGA work.

At this stage, the Congress was in an unenviable position, facing attacks simultaneously from former members of the NAC, as well as by conservative economists looking for a more dramatic shift in policy. The UPA did not have an opportunity to resolve this impasse, since it was voted out of power, but Modi’s attitude towards these programmes, in many ways, continued that of UPA in its later years—even if he amplified disinterest to vehemence.

His choice of appointments reflected this animosity. Two of the economists Modi appointed to key advisory positions had criticised the UPA’s flagship programmes: Arvind Panagariya, currently the head of the NITI Aayog, the revamped Planning Commission; and Arvind Subramanian, now the chief economic adviser. The views of these two economists converged on the idea that India’s fiscal policy was burdened by the extravagance of the UPA’s pro-poor measures. In October 2014, two months before his appointment to head the NITI Aayog, Panagariya co-wrote a famous column dismissing the NREGA as a disastrous government excess. He described it as a “rural inefficiency act.”

In mid 2013, Subramanian had aimed a well-meaning attack directly at the foundations of programmes such as the NREGA—specifically, he targeted Amartya Sen’s idea of conferring rights upon the poor in order to redistribute wealth, which was championed into law by his collaborator, the development economist Jean Drèze. According to Subramanian, the amount the government spent on each citizen had increased by nearly 75 percent under the UPA, leading to high fiscal deficits—when public expenditure exceeds revenue—as well as inflation and instability. “A state that prioritises or over-emphasises rights and entitlements,” he wrote, “risks unleashing this vicious spiral.”

Those in favour of government spending, such as Sen and Drèze, have been less worried by the deficit, suggesting several ways to address it—collecting more taxes, for one. Others, including Raghuram Rajan, the governor of the Reserve Bank of India, have cited different causes for economic instability, such as the reckless and unproductive lending by banks to industry.

Modi’s appointment of Panagariya and Subramanian served as a signal to the corporate sector—which had financed and cheer-led his campaign—of a new pragmatism at work. But the political repercussions of Modi’s economic preferences were severe, forcing him to backtrack, most visibly in the case of the land acquisition bill. With NREGA, however, he did not have the benefit of blaming the opposition for his troubles.

The NREGA serves as a barometer of the agrarian crisis; it is designed to reflect the shocks to rural livelihoods caused by both the vagaries of the weather and the callousness of the state. The high demand for work on the ground despite the BJP government’s initial aversion to the programme should be a sign that Modi will have to strike a balance between the advice of his economists and the better judgment he claims to have as a politician with an ear to the ground.